Renewable fuels mandate: Still broken, still in need of action

June 8, 2018

As Americans hit the road this summer and gas prices are in the news, the Trump administration continues to seek a solution to what's proven to be a thorny issue - the Renewable Fuels mandate (RFS). Now more than a decade old, this is the law that forces more and more ethanol into our fuel supply. While Midwestern corn farmers surely appreciate government-created demand for their product, a wide range of others have concerns with the effects of the RFS including restaurant operators, boaters, small engine manufacturers, poultry farmers, anti-hunger groups and wildlife organizations.

President Trump himself has convened multiple meetings on the RFS and is searching for a way to fix it. The reason the RFS needs to be addressed is that the law does not match today's reality. Our existing vehicles, engines, and infrastructure can only handle so much ethanol until we hit the "blend wall" in which potentially several negative unintended consequences are triggered. While the law pushes more ethanol into our fuel, it never contemplated that overall gasoline demand would drop, which has happened. In fact, this year gasoline demand is down 12 percent from where it was expected to be when the RFS was passed. By 2022, it'll be 22 percent lower than forecasted. The result is that we are adding more and more ethanol into less fuel. Something has to give.

In the short term, unless EPA adjusts the ethanol volume requirements to reflect actual market realities, the blend wall could be breached. In other words, the mandate will force more ethanol into the fuel supply than can be accommodated through standard E10 (10 percent ethanol) gasoline. Additionally, CBO has found that complying with the mandate as currently written could increase fuels prices in a meaningful way. In the long term, we are left with continuing uncertainty from statutory requirements that conflict with today's market realities.

Where should the excess ethanol go? Well, almost three out of four of vehicles on the road today are not manufacturer approved to use higher ethanol blends like E15 (15 percent ethanol fuel). Extensive testing by the Coordinating Research Council (CRC) -- the gold standard in vehicular research for the better part of a century -- has determined E15 could damage engines and fuel systems and even void manufacturers' warranties. What about Flex Fuel Vehicles that can take E85 fuel? They represent only 8 percent of the vehicle fleet, and E85 accounts for about 1/10th of 1 percent of gasoline demand - a drop in the bucket.

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